MERGERS AND ACQUISITIONS


Mergers and Acquisitions

There are many reasons why companies are seeking to merge their businesses. These can include the need in combining resources, area of expertise, practice, and experience as well as the need in enhancing employees’ talent and/or diversifying and concentrating managers' qualifications of two or more companies which may be brought together to open new opportunities to businesses and facilitate their expansion.
In deciding upon such significant matters you must be successfully represented throughout the process and your goals achieved efficiently and in a time-effective manner with minimum disruption to your business through the process.
Thus in an acquisition process when your company is bought out by another entity you may still carry on a subsidiary of the purchased company that is not something you wish currently to undertake. In such a case you can also effectively transfer the business and assets to the purchasing company.

Equally, whether you represent a business buyer or seller we are happy to assist and provide you with efficient and smooth business transmission and/or business purchase support to achieve the best possible return on your investment.
Legal Framework

Mergers and acquisitions in Cyprus are governed by the Companies Law CAP 113 (the “Law”), which lays down rules on domestic, and cross-border mergers, divisions, transfer of assets and exchange of shares procedures between two or more companies.

The Law was harmonized with the relevant EU legislation, and specifically with Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 that reflects EU relative legal requirements and standards concerning cross-border mergers respectively.

It is worthy to note that public mergers have slightly different procedure from the procedures relevant to limited liabilities companies in Cyprus. For more information on this topic. Please contact us

Local Reorganizations - general guidelines on completion

- For the merger or acquisition to take place, the Board of Directors’ resolution of each merging company approving the transaction along with a draft plan for the auditors’ review required;

- An application to a Court for a meeting to be scheduled between parties of merging companies accompanied by the sworn statement (an Affidavit) of each merging company respectively is filed on behalf of the companies involved;

- After the leave of the Court is obtained, separate meetings of shareholders and creditors of the merging companies are convened respectively;

- The reorganization plan is then approved by the shareholders of each merging company whereas the shareholders of the Absorbing company will also approve the reduction of capital

- A report of the Chairman of the shareholders’ meeting of each of the merging companies will need to be drafted;

- A report of the Chairman of the creditors’ meeting (where applicable) of each of the merging companies will need to be drafted;

- After the merger plan is approved a petition for the merger final approval by the Court is filed. A sworn statement (an Affidavit) of each company director is required to be enclosed to the petition filed with the Court;

- A copy of the merger plan and the Court Order is also required to be filed with the Department of Registrar of Companies for the registration of the merger.

Cross-Border Reorganizations - general guidelines on completion

After the negotiation of the terms of the merger are completed the following formalities and steps for the completion of the merger need to be done all in compliance with effective local legislation and EU Directive on Cross-Borders Mergers:

- Drafting of a Merger Plan;

- Drafting of the merger Directors’ Report;

- Preparing an independent Expert Report (if applicable);

- Submitting the Merger Plan to the Department of Registrar of Companies and Official Receiver (the “DRCOR”) along with relevant notices and Forms of the DRCOR;

- Arranging Publication of the merger draft plan in the manner prescribed by the Law;

- Providing the merger report to the employees and members of the Cyprus merging company;

- Approval by the general meeting of each of the merging companies of the merger draft plan;

- Liaising with creditors (where applicable);

- Filing a Court Application along with sworn statements (Affidavits) for obtaining a Court Order for the pre-merger certificate issue;

- Second Application filling with the competent Court for the scrutiny of the merger.

Public companies’ mergers

Public companies’ mergers procedures will be the same with minor changes in the merger plan that include the name, the form, and the registered office of the companies. Besides the plan will also contain information on the transfer of shares, the amount of money, how the shares will be distributed, and the date when the new shareholders will have the right to profits.
For more detailed information please contact us.

The major advantages of Cypriot mergers

The major advantages of Cypriot mergers and acquisitions are normally accessed from a taxation angle and include the following:

- Mergers and acquisitionsare excluded from the value added tax (VAT) in Cyprus;

- Profits generated by the dividends are exempt from the corporate tax;

- No capital gains tax in Cyprus on profits derived from the transfer of immovable properties during the merger or acquisition;

- No transfer fee payable on the transfer of immovable properties.

Disclaimer

It is noted that the content of this article and the information therein are intended to provide a general guideline to the matters discussed above to be used for information purposes only. Under no circumstances the above information may constitute a substitution for professional advice. We suggest that additional advice should be sought considering once individual characteristics and facts of the case in hand which may vary from situation to situation and the legal characteristics of each particular case. We accept no authors’ and/or publishers’ responsibility for any loss occasioned by acting or refraining from acting on the basis of this article.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances


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